[Click eStock] “LG Uplus, Annual Operating Profit Expected to Reach 1 Trillion Won”

Daishin Securities Report

[Asia Economy Reporter Minji Lee] Daishin Securities maintained its buy rating and target price of 20,000 KRW for LG Uplus on the 13th, expecting the company to achieve an annual operating profit of 1 trillion KRW.

In the second quarter, LG Uplus is expected to record sales of 3.4 trillion KRW and operating profit of 270 billion KRW, representing increases of 5% and 11% respectively compared to the same period last year. The net increase in 5G subscribers for the second quarter is estimated at 420,000, which is 90,000 more than the same period last year. Kim Hoejae, a researcher at Daishin Securities, said, “The effect of flagship devices has disappeared, so the net increase compared to the previous quarter has decreased, but due to the widespread adoption of 5G, it will increase compared to the same period last year.”

Wireless service revenue is expected to increase by 5% to 1.4 trillion KRW compared to the same period last year. Since the turnaround in the first quarter of 2019, it has risen for nine consecutive quarters and is expected to record the highest quarterly sales each quarter.

With growth in both wireless and wired B2B businesses, operating revenue is predicted to reach 2.49 trillion KRW, and the cumulative amount for the first half of the year is expected to increase by 5% to 5 trillion KRW compared to last year. The company is steadily progressing toward the expected target of 10 trillion KRW. The marketing cost of 550 billion KRW in the first quarter included a reversal of about 20 billion KRW in device inventory valuation losses, and the second quarter is expected to slightly increase to 590 billion KRW.

Amortization of tangible and intangible assets is expected to increase by 7% to 560 billion KRW compared to the same period last year. Researcher Kim Hoejae said, “All three mobile carriers reflected significant impairment losses on the 28GHz band in the fourth quarter of last year, so the 5G investment burden will ease until the 28GHz band is reassigned after 2024,” adding, “Since 2019, amortization related to investments has shown a gradual annual increase of about 5%.”

Due to profit improvements, the dividend level is also expected to rise. Although LG Uplus does not present a clear dividend policy, it has maintained a minimum dividend payout ratio of around 30% since 2014 and plans to pay dividends at a 40% payout ratio over the past three years. Researcher Kim said, “Going forward, the company will continue a strategy of excess dividends based on a minimum 30% policy considering the profit level of the relevant year,” adding, “This year, the company is conducting a 100 billion KRW share buyback, so the dividend payout ratio is expected to be 30%, and the DPS is forecasted at 500 KRW.”

This content was produced with the assistance of AI translation services.